Several Pennsylvania chiropractors, chiropractic clinics and their employees have filed a class-action lawsuit accusing Highmark, the parent of Highmark Blue Cross and Blue Shield, of acting as a not-for-profit "in name only" by hoarding more than $2 billion, or more than a third of its annual claims costs and expenses, in reserves.
Capital Blue Cross of Central Pennsylvania, a longtime partner with Highmark, also was named in the suit, which was filed June 29 in York County (Pa.) Court of Common Pleas.
The suit claims that Highmark has amassed "a war chest . . . far in excess of the amounts necessary to secure and ensure financial solvency." As a result, the plaintiffs said, they have seen lower fees as providers, higher premiums as employers and reduced benefits as health-plan subscribers.
The Highmark health plan also has stirred controversy in its home state by trying to play banker with struggling hospitals.
Earlier this year, Highmark offered Children's Hospital of Pittsburgh $100 million to stay out of a merger with UPMC Health System. After Children's rejected the offer, Highmark and several other health insurers filed an antitrust lawsuit to block the deal (June 25, p. 18). The insurer also took its hand to the hospital marketplace last year by issuing a $125 million subordinated loan to finance the newly formed West Penn Allegheny Health System.
Highmark spokeswoman Denise Grabner said the company had not yet seen the chiropractors' lawsuit. In defense of the company, Grabner said the state insurance department closely monitors Highmark's reserves. "We report our reserves every year," she said.
According to the lawsuit, Highmark's financial reserves swelled to $2.03 billion, or 34.7% of claims and expenses, in 2000 from $1.48 billion, or 26.7% of claims and expenses, in 1996.
Highmark's 1996 filing with the state said its 26.7% surplus "was more than adequate for the financial operations and solvency of the company." Thus, the suit alleges, Highmark's 2000 reserves were at least $463 million greater than necessary.
Although the state insurance department monitors all health plans' reserves to ensure the plans remain solvent, the department doesn't dictate an amount beyond which a surplus is deemed excessive, deputy press secretary Melissa Fox said. It is possible Highmark's reserve level could violate some not-for-profit law outside the department's scope, Fox said.
Pittsburgh-based Highmark provides health coverage to more that 3 million people through its subsidiaries Highmark Blue Cross and Blue Shield and Pennsylvania Blue Shield. The plaintiffs are covered under insurance plans operated jointly by Highmark and Harrisburg-based Capital Blue.
The plaintiffs also claim that Highmark's merger strategy and investments in businesses that operate outside Pennsylvania, including for-profit ventures, are not consistent with its status as a not-for-profit company. The timing of the suit was triggered in part by Highmark's decision to go into competition with Capital Blue after the two failed to reach a merger agreement in May, plaintiffs' lawyers said.